How does Hardees handle revenue recognition for contributions to advertising funds by franchisees?

According to Hardees's 2025 Franchise Disclosure Document, revenue from franchisee contributions to advertising funds is recognized as it is earned. These advertising funds include contributions to the Hardee's National Advertising Fund (HNAF), Hardee's Co-ops, the Carl's Jr. national advertising fund, and certain international advertising funds, which are collectively referred to as the "Advertising Funds".

In practical terms, this means that Hardees recognizes the revenue from these franchisee contributions as the advertising services are provided or the advertising campaigns run. The contributions are based on a percentage of sales from the franchised restaurants. This revenue recognition method aligns the recognition of advertising revenue with the actual delivery of advertising and marketing services.

For a prospective Hardees franchisee, this indicates that the advertising fees they pay are directly tied to the advertising and marketing efforts undertaken by Hardees and its affiliated funds. The franchisee's contributions are recognized as revenue by Hardees as these advertising services are delivered, ensuring that the funds are accounted for in conjunction with the related advertising activities. This arrangement provides transparency in how Hardees manages and accounts for advertising funds contributed by franchisees.